Question 1

The strength of the competition faced by a company can profoundly affect its

Accepted Answer

A) pricing. 
B) output decisions. 
C) input decisions. 
D) All of the above are correct. 
A) pricing. 
B) output decisions. 
C) input decisions. 
D) All of the above are correct.

Question 2

Zero economic profits for a perfectly competitive firm in the long run means

Accepted Answer

A) the firm must exit the industry. 
B) the firm is in equilibrium. 
C) the firm will shut down until the market improves. 
D) average revenue is insufficient to cover long-run average cost. 
A) the firm must exit the industry. 
B) the firm is in equilibrium. 
C) the firm will shut down until the market improves. 
D) average revenue is insufficient to cover long-run average cost.

Question 3

Figure 10-8
  
-Figure 10-8 displays the cost curves of a perfectly competitive firm.Profits at a price of $10 would be approximately

Accepted Answer

A) $1 per unit. 
B) $3 per unit. 
C) $5 per unit. 
D) $10 per unit. 
A) $1 per unit. 
B) $3 per unit. 
C) $5 per unit. 
D) $10 per unit.

Question 4

A firm that is earning zero economic profit should go out of business.

Accepted Answer

A) True 
 B)False

Question 5

Total profit of a competitive firm can be found by multiplying profit per unit times units sold.

Accepted Answer

A) True 
 B)False

Question 6

In a long-run equilibrium in a perfectly competitive market, firms are selling at a price equal to average cost.

Accepted Answer

A) True 
 B)False

Question 7

Firms will continue to enter a perfectly competitive industry until

Accepted Answer

A) the supply curve is vertical. 
B) the supply curve is meaningless. 
C) any excess returns have been competed away. 
D) all resources are fully employed. 
A) the supply curve is vertical. 
B) the supply curve is meaningless. 
C) any excess returns have been competed away. 
D) all resources are fully employed.

Question 8

A perfectly competitive firm will not operate where MC = MR but at MC = AC.

Accepted Answer

A) True 
 B)False

Question 9

If a firm sells its output at a price greater than AVC, it will earn economic profit.

Accepted Answer

A) True 
 B)False

Question 10

A firm's minimum AC is $10, its minimum AVC $7.Show this firm's short-run supply curve, explaining how you obtained it.

Accepted Answer

Draw a U-shaped AC and AVC, with Q at

Question 11

The short-run supply curve of the perfectly competitive firm is the firm's

Accepted Answer

A) MC curve. 
B) AVC curve. 
C) MC curve above the minimum point on the AVC curve. 
D) MC curve above the minimum point on the ATC curve. 
A) MC curve. 
B) AVC curve. 
C) MC curve above the minimum point on the AVC curve. 
D) MC curve above the minimum point on the ATC curve.

Question 12

The short-run supply curve of the perfectly competitive industry is found by summing the

Accepted Answer

A) AC curves of the individual firms in the industry. 
B) AVC curves of the individual firms in the industry. 
C) MC curves above AVC of the individual firms in the industry. 
D) There is no short-run supply curve in a competitive industry. 
A) AC curves of the individual firms in the industry. 
B) AVC curves of the individual firms in the industry. 
C) MC curves above AVC of the individual firms in the industry. 
D) There is no short-run supply curve in a competitive industry.

Question 13

Perfect competition forms one extreme of the market structure spectrum.

Accepted Answer

A) True 
 B)False

Question 14

Figure 10-3
  
-In Figure 10-3, the perfectly competitive firm is realizing a

Accepted Answer

A) loss equal to ABCE. 
B) profit equal to ABCE. 
C) profit equal to ABDF. 
D) loss equal to ABDF. 
A) loss equal to ABCE. 
B) profit equal to ABCE. 
C) profit equal to ABDF. 
D) loss equal to ABDF.

Question 15

What is the difference between the accountant's concept of profit and the economist's view of profit?

Accepted Answer

Accountants tend to include in TC contra

Question 16

Show what happens to the industry equilibrium when new firms enter a perfectly competitive market in the long run.

Accepted Answer

The diagram of the process sho

Question 17

Perfectly competitive firms are known for being "price makers."

Accepted Answer

A) True 
 B)False

Question 18

A perfectly competitive firm has a horizontal demand curve because it can sell as much as it wants at the market price.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 10-1
A perfectly competitive producer has the following short-run average cost curve and marginal cost curve:
SR AC = 2Q + 3
MC = 4Q + 3
where costs are measured in dollars and Q represents the firm's output in units.
-The firm whose short-run cost curves are given in Exhibit 10-1 has a long-run fixed cost of

Accepted Answer

A) $0. 
B) $2. 
C) $3. 
D) $4. 
A) $0. 
B) $2. 
C) $3. 
D) $4.

Question 20

Firms in a perfectly competitive market produce at minimum average cost in the short run and the long run.

Accepted Answer

A) True 
 B)False

Exam 10: The Firm and the Industry Under Perfect Competition

The strength of the competition faced by a company can profoundly affect its

Zero economic profits for a perfectly competitive firm in the long run means

Figure 10-8 -Figure 10-8 displays the cost curves of a perfectly competitive firm.Profits at a price of $10 would be approximately

A firm that is earning zero economic profit should go out of business.

Total profit of a competitive firm can be found by multiplying profit per unit times units sold.

In a long-run equilibrium in a perfectly competitive market, firms are selling at a price equal to average cost.

Firms will continue to enter a perfectly competitive industry until

A perfectly competitive firm will not operate where MC = MR but at MC = AC.

If a firm sells its output at a price greater than AVC, it will earn economic profit.

A firm's minimum AC is $10, its minimum AVC $7.Show this firm's short-run supply curve, explaining how you obtained it.

The short-run supply curve of the perfectly competitive firm is the firm's

The short-run supply curve of the perfectly competitive industry is found by summing the

Perfect competition forms one extreme of the market structure spectrum.

Figure 10-3 -In Figure 10-3, the perfectly competitive firm is realizing a

What is the difference between the accountant's concept of profit and the economist's view of profit?

Show what happens to the industry equilibrium when new firms enter a perfectly competitive market in the long run.

Perfectly competitive firms are known for being "price makers."

A perfectly competitive firm has a horizontal demand curve because it can sell as much as it wants at the market price.

Firms in a perfectly competitive market produce at minimum average cost in the short run and the long run.

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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